1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from____________________ _ to________________________
Commission file number 0-10669
CB&T, Inc.
(Exact name of registrant as specified in its charter)
Tennessee 62-1121054
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
101 East Main Street, McMinnville, Tennessee
(Address of principal executive offices)
(Zip Code)
37110
(Registrant's telephone number, including area code)
(931) 473-2148
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of September 30, 1997
264,113 shares.
This filing contains 13 pages.
<PAGE> 1
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 3
Consolidated Balance Sheets for the periods ended
September 30, 1997 and December 31, 1996
(Unaudited) 4
Consolidated Statements of Income for the three
(3) month period and year-to-date ended
September 30, 1997 and 1996, respectively
(Unaudited) 5
Consolidated Statements of Cash Flows for the year-to-
date ended September 30, 1997 and 1996, respectively
(Unaudited) 6
Management's Statement 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 12
Signatures 13
<PAGE> 2
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE> 3
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
McMinnville, Tennessee 37110
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
(Dollars in Thousands)
ASSETS
Cash and due from banks $ 7,625 7,021
Federal funds sold 2,850 1,175
Investment securities (amortized cost
$101,272 and $101,026, respectively) 102,797 102,070
Loans, net of unearned income and
allowance for possible credit losses 145,443 142,096
Interest receivable 3,257 3,116
Bank premises and equipment,
less allowances for depreciation 2,206 2,333
Other assets 3,941 3,648
TOTAL ASSETS $ 268,119 261,459
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $26,784 28,178
Interest-bearing deposits (other than time) 74,770 69,826
Time deposits less than $100M 89,643 90,610
Time deposits of $100M or more 30,697 28,943
TOTAL DEPOSITS $ 221,894 217,557
Accounts payable and accrued liabilities 3,092 3,097
FHLB borrowings 7,033 7,203
Federal funds purchased/repurchase agreements 2,245 1,362
TOTAL LIABILITIES $ 234,264 229,219
SHAREHOLDERS' EQUITY:
Common Stock of 2.50 par value: Authorized
1,000,000 shrs, issued 331,814 shrs
including 67,701 and 67,229 Treasury shrs
in September `97 and December `96,
respectively $ 830 830
Surplus 5,000 5,000
Retained earnings 32,551 31,179
Less cost of treasury shares (5,471) (5,416)
Net unrealized gains (losses) on available
for sale securities, net of tax 945 647
TOTAL SHAREHOLDERS' EQUITY $ 33,855 32,240
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 268,119 261,459
====== ======
<PAGE> 4
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
McMinnville, Tennessee 37110
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year-to-date
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
INTEREST INCOME:
Interest and fees on loans $ 3,542 3,420 10,491 10,215
Interest on investment securities:
Taxable income 1,218 1,231 3,567 3,589
Tax-exempt income 443 344 1,244 973
Other interest income 22 54 136 227
TOTAL INTEREST INCOME $ 5,225 5,049 15,438 15,004
INTEREST EXPENSE:
Interest on deposits other
than time $ 584 531 1,649 1,550
Time deposits less than $100M 1,217 1,181 3,627 3,542
Time deposits of $100M or more 445 385 1,294 1,152
Interest on FHLB borrowings 96 97 317 308
Interest on federal funds
purchased/ repurchase agreements 34 12 79 33
TOTAL INTEREST EXPENSE $ 2,376 2,206 6,966 6,585
TOTAL NET INTEREST INCOME $ 2,849 2,843 8,472 8,419
PROVISION FOR POSSIBLE CREDIT LOSSES ( 91) ( 123) ( 313) ( 301)
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
CREDIT LOSSES $ 2,758 2,720 8,159 8,118
OTHER INCOME:
Service charges on deposit accounts$ 305 299 905 891
Other service charges, commissions
and fees 116 74 235 238
Net realized gains (losses) on
investment securities 9 ( 15) 23 ( 12)
Other income 86 157 320 352
TOTAL OTHER INCOME $ 516 515 1,483 1,469
OTHER EXPENSES:
Salaries and employee benefits $ 860 844 2,667 2,632
Net occupancy expense 92 75 262 224
Furniture and equipment expense 226 205 641 582
FDIC Assessment 7 1 20 2
Other 438 427 1,281 1,194
TOTAL OTHER EXPENSES $ 1,623 1,552 4,871 4,634
INCOME BEFORE INCOME TAXES $ 1,651 1,683 4,771 4,953
Income taxes ( 487) ( 533) ( 1,415) ( 1,564)
NET INCOME $ 1,164 1,150 3,356 3,389
===== ===== ===== =====
Common shares outstanding ended
September 30 264,113 264,604 264,113 264,604
Net income per share of common stock $ 4.40 4.35 12.71 12.81
Dividends per share of common stock $ 0.00 0.00 7.51 6.50
<PAGE> 5
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
MCMINNVILLE, TENNESSEE 37110
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period Ended
September 30
1997 1996
(Dollars in thousands)
Operating activities:
Net income $ 3,356 3,389
Adjustments to reconcile net income
to net cashprovided by operating
activities:
Provision for possible credit losses 313 301
Provision for depreciation and
amortization 415 243
Decrease (increase) in interest
receivable ( 141) ( 86)
Decrease (increase) in other assets ( 293) ( 396)
Increase (decrease) in accounts
payable and accrued liabilities ( 5) 188
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 3,645 3,639
Investing activities:
Purchases of investment securities $( 41,133) (41,284)
Proceeds from sales of investment
securities 17,531 11,731
Proceeds from maturities, calls and
principal collections of investment
securities 23,356 26,913
Net decrease (increase) in unrealized
gains on investment securities ( 481) 999
Net decrease (increase) in loans ( 3,660) ( 3,260)
Purchase of premises and equipment ( 289) ( 298)
NET CASH USED BY INVESTING ACTIVITIES $( 4,676) ( 5,199)
Financing activities:
Net increase (decrease) in noninterest-
bearing and interest-bearing deposits $ 4,337 1,561
Net increase (decrease) in federal funds
purchased/repurchase agreements 883 1,364
Cash dividends ( 1,983) ( 1,753)
Purchase of Treasury Stock ( 55) ( 577)
Net increase (decrease) in FHLB borrowings ( 170) ( 2,863)
Increase (decrease) in after-tax unrealized
gains on securities 298 ( 620)
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 3,310 ( 2,888)
INCREASE IN CASH AND CASH EQUIVALENTS $ 2,279 ( 4,448)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 8,196 13,296
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 10,475 8,848
===== ======
<PAGE> 6
The unaudited consolidated financial statements have been prepared on
a consistent basis and in accordance with the instructions to Form 10-Q
and do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments necessary
for a fair presentation have been included. These adjustments were
normal reoccurring adjustments. For further information, refer to the
consolidated financial statements and footnotes included in the
Corporation's Annual Report on Form 10-K for the year ended December
31, 1996.
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
At September 30, 1997, average total assets were $267.2 million
compared to $257.7 million at September 30, 1996 and $257.3
million at December 31, 1996. Average earning assets at the
period ended September 30, 1997 totaled $250.4 million as
compared to $240.8 million at September 30, 1996 and $241.3
million at December 31, 1996, respectively. The following
discussion examines the significant factors relative to changes
in the Corporation's balance sheets.
SECURITIES
The investment portfolio is comprised of U.S. Treasury and other
U.S. Government agency-backed securities, collateralized mortgage-
backed securities, tax-exempt obligations of states and political
subdivisions and certain other investments. The quality of
obligations of states and political subdivisions will be A, AA,
or AAA, the majority of which will be AA or AAA, as rated by a
nationally recognized service. As a matter of policy, in support
of the local service area, certain unrated bonds of local
municipalities may be purchased provided they are of reasonable
credit risk.
As of December 31, 1995, all investment securities were
classified as available-for-sale. Management classified all
securities as available-for-sale so that securities may be sold
prior to their maturity for purposes of bank asset allocations,
rate sensitivity or liquidity and, hence, tend to be more liquid.
The Corporation's average debt securities portfolio at September
30, 1997 was $101.9 million which was an increase from average
investments of $97.3 million at September 30, 1996 and $97.6
million at December 31, 1996. At September 30, 1997, the
liquidity portion of the current portfolio, fixed rate debt
securities maturing in the year or less, totaled $12.9 million or
12.6% of total debt securities and is an integral part of
asset/liability management. In addition, floating rate
securities with a repricing frequency of one year or less totaled
$5.4 million or 5.3% of total debt securities. At September 30,
1996, fixed rate securities maturing in one year or less totaled
$13.8 million and floating rate debt securities with a repricing
frequency of one year or less totaled $11.1 million.
LOANS
The Corporation's average loan portfolio totaled $144.1 million
at September 30, 1997 which was an increase over the
corresponding periods in 1996 with average loans of $137.8
million and $138.5 million at September 30, 1996 and December 31,
1996, respectively. Average loan growth reflected an increase of
$6.3 million or 4.6% over September 30, 1996 and $5.6 million or
4.0 % over December 31, 1996. The increase in the loan portfolio
was attributed to the growth in real estate mortgage lending and
commercial lending. Real estate loans increased $4.1 million or
5.3% over September 30, 1996 and $3.0 million or 3.8% over
December 31, 1996. Commercial loans increased $1.8 million or
4.3% and $.2 million or .5% over September 30, 1996 and December
31, 1996, respectively. There was no commercial paper included
in the loan portfolio at the end of the current reporting period.
Upon adoption of the Statement of Financial Accounting Standards
Nos. 114 and 118 "Accounting By Creditors for Impairment of a
Loan" and "Accounting By Creditors for Impairment of a Loan -
Income Recognition and Disclosures", the Corporation's Management
defines an impaired loan as one for which it is likely the
subsidiary will not collect its principal and interest in
accordance with the contracted schedule. Since SFAS 114 states
that the classifying of loans as impaired need not be applied
individually to "large groups of smaller balance homogeneous
loans", Management has taken the position that SFAS 114 does not
apply to the Corporation's consumer loan portfolio or residential
mortgage loans which are collectively evaluated for impairment.
Management may, however, choose to apply the Statement to certain
specific larger mortgage loans. As a matter of the Corporation's
<PAGE> 8
policy, there is no difference between impaired loans and
nonaccruing loans with the exception of those loans which will be
evaluated collectively.
A loan is placed on nonaccrual status when interest or principal
has not been paid for 90 days. Exceptions to this policy are
those loans that are in the process of collection and are well
secured. A well-secured loan is secured by collateral with
sufficient market value to repay principal and all accrued
interest. When evaluating a loan, the loan officer first
considers the following factors: ability to pay, financial
condition of the borrower, management, collateral and guarantors,
structure, industry and economics. These factors having been
weighed, the loan is then assigned to one of the following
ratings: A-Excellent, B-Good, C-Fair, D-Watch (Substandard), E-
Doubtful (Impaired). Losses on impaired loans are recognized in
a timely manner, as soon as there is a reasonable probability of
loss and the amount of loss can be calculated, that loss will be
recognized.
At September 30, 1997, the recorded investment in loans that
were considered to be impaired under SFAS 114 was $0. The
related allowance for possible credit losses for the impaired
loans at September 30, 1997 was $0. The average recorded
investment in impaired loans during the nine months was
approximately $21,498. The Corporation does not recognize
interest income on impaired loans and the entire change in the
net carrying amount is reported as an adjustment to provision for
possible credit losses, but in no event are changes in the net
present value used to justify having a loan booked at a value
that exceeds its recorded investment value.
The Corporation maintains sound credit polices through its loan
review committee and various loan committees by evaluating loan
and credit quality, reviewing identified problem loans and
continually monitoring their status and implementing immediate
procedures to minimize any potential negative impact on the
Corporation's operations. The following represent risk factors
categorically in the loan portfolio at September 30, 1997 (in
thousands): Loans accounted for on a nonaccrual basis - $2;
Loans past-due ninety days or more as to interest or principal
payments - $765; There were no trouble debt restructuring loans;
Impaired loans - $0. At December 31, 1996, these risks factors
were: Nonaccruing loans - $119; Loans past due ninety days or
more - $851; There were no trouble debt restructuring loans;
Impaired loans - $310.
Any loans classified for regulatory purposes do not represent or
result from trends or uncertainties which management reasonably
expects will materially affect operating results, liquidity or
capital resources nor is management aware of any known trends,
events, or uncertainties that will have or that are likely to
have material effect on the Corporation's liquidity, capital
resources or operations.
OTHER EARNING ASSETS
At the reporting period ended September 30, 1997, average federal
funds sold totaled $4.4 million compared to $5.7 million and $5.2
million, which equates to $1.3 million less than September 1996
and $.8 million less than December, 1996, respectively.
DEPOSITS
Average deposits of the Corporation for the period ended
September 1997 were $222.0 million compared to $215.8 million and
$216.0 million for the corresponding period in 1996 and the year
ended December, 1996, respectively. Attractive short and medium
term interest rate increases caused depositors to continue to
move funds into certificates of deposit which resulted in an
increase in these deposits. Certificates of deposit of less than
$100 thousand increased $2.7 million or 3.1% and $2.3 million or
2.6% over the periods ended September and December, 1996,
respectively. Certificates of deposit of $100 thousand or more
increased over September 30, 1996 by $3.3 million or 12.2% and
December 31, 1996 by $3.0 million or 10.9%.
<PAGE> 9
CAPITAL
The capital growth rate, exclusive of unrealized net gains or
losses on securities, increased $2,042 thousand or 6.6% over
September 30, 1996 and increased $1,317 thousand or 4.2% over
December 31, 1996. For the period ended September, 1997, the
Corporation had an equity capital to assets ratio of 11.8%
compared to 11.9% for September 30, 1996 and 11.6% for December
1996, respectively. Regulatory risk-adjusted capital adequacy
standards were revised in 1993. Under risk-adjusted capital
requirements, total capital consists of Tier 1 capital which is
essentially Common Shareholders' equity less tangible assets, and
Tier 2 capital which consists of certain types of preferred
stock, subordinated debt, and allowance for possible credit
losses not to exceed 1.25% of risk-adjusted assets. The capital
ratio is then computed by dividing the sum of Tier 1 and Tier 2
capital by the total of risk-adjusted assets including converted
off-balance-sheet risks. The minimum requirement for Tier 1
capital is 4% and total capital (Tier 1 plus Tier 2) is 8%. The
Corporation's Tier 1 capital ratio was 22.6% and total capital
was 23.8% at September 30, 1997 compared to 21.3% and 22.6% at
September 30, 1996 and 21.4% and 22.7% at December 31, 1996.
These ratios substantially exceed the Federal Reserve Board's
capital guidelines for a "well-capitalized" institution, which
are 6% for Tier 1 and 10% for total capital. It is management's
intent to maintain a level of capitalization that allows the
flexibility to take advantage of opportunities that may arise in
the future.
The formation of two nonbank subsidiaries resulted in the July,
1996 business opening of CBT Insurance, Inc. and CBT Realty, Inc.
Both subsidiaries are wholly owned by CB&T, Inc. with an initial
investment in each of $1,000 to purchase one hundred percent
(100%) of the stock issued by each of the newly formed
subsidiaries.
The principal activity of CBT Insurance, Inc. is insurance sales.
CBT Realty, Inc. will engage in the holding and disposing of real
estate acquired through foreclosure; however, through September
1997, there has been no activity in CBT Realty, Inc.
MATERIAL CHANGES IN RESULTS OF OPERATION
Interest from investment securities for the current quarter
increased by $86 thousand or 5.5% from the corresponding 1996
period. This increase in investment income is attributable to
the increase in municipal bonds in the portfolio, therefore
resulting in a higher average yield than that of 1996.
At year-to-date September 30, 1997, there were net realized gains
(losses) on the sales of securities of $23 thousand compared to
($12) thousand in September, 1996 and ($22) thousand in December,
1996. At September 30, 1997 net unrealized gains in securities
totaled $1.5 million and categorically were; Treasuries - $.1
million, Agencies - $.3 and Municipals -$1.1 million. For the
corresponding period in 1996, net unrealized gains totaled $.5
million and categorically were; Treasuries - $.1 million,
Agencies - $ (.1) million and Municipals - $.5 million.
The Corporation's interest from loans for the quarter ended
September 30, 1997, increased $122 thousand or 3.6% over the same
period in 1996. This increase in loan interest income is
primarily a result of the increase in the volume of loans
outstanding, primarily in the area of real estate lending.
Interest income on federal funds sold decreased $32 thousand or
59.3% in the third quarter of 1997 from the corresponding period
in 1996.
Due to slightly rising interest rates on deposit accounts and
growth in higher yielding certificates of deposit, interest
expense on interest-bearing deposits increased over the
September, 1996 period by $149 thousand or 7.1%. Interest
expense for the 1997 reporting period on certificates of deposit
of less than $100 thousand increased by $36 thousand or 3.1% for
the third quarter and interest on time certificates of $100
<PAGE> 10
thousand or more increased by $60 thousand or 15.6%. Total
interest expense on transaction accounts and savings deposits for
the 1997 reporting period increased over that of 1996 by $53
thousand or 10.0%. Interest expense on F.H.L.B. borrowings
decreased $1 thousand or 1.0% from the same quarter in 1996 due
to a decrease in the balance outstanding to F.H.L.B. during the
current year.
Non-interest income (excluding securities transaction) decreased
$23 thousand or 4.3% for the September 30, 1997 quarter over the
corresponding period in 1996. This decrease is primarily
attributable to a decrease in insurance commissions and mortgage
loan application and closing fees.
For the quarter ended September 30, 1997, non-interest expense
increased by $71 thousand or 4.6%. This increase in non-
interest expense in 1997 over the corresponding period in 1996 is
a result of an increase in salaries and employee benefits,
occupancy and furniture and equipment expenses associated with
the opening a new branch in the fall of 1996, and an increase in
FDIC insurance premium assessments.
Year-to-date 1997, provision for possible credit losses reflects
an increase of $12 thousand or 4.0% over the corresponding period
in 1996.
The net result of operations after federal income taxes for 1997
is a decrease of $33 thousand or 1.0% over the same year-to-date
period in 1996.
It is the opinion of management that during the current reporting
period of September 1997, the effect of general inflation was
relatively immaterial to the operation of the Corporation and the
results thereof.
<PAGE> 11
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
PART II. OTHER INFORMATION
Items 1.-5. None applicable to the reporting period for the
three (3) months ended September 30, 1997.
Item 6. Exhibits and Reports on Form 8-K.
(a) - No exhibits were furnished in accordance
with Item 601 of Regulation S-K for three
(3) months ended September 30, 1997.
(b) - No reports on Form 8-K were filed by the
Registrant during the three months ended
September 30, 1997.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
C B & T, INC.
By: /s/ Jeffrey A. Golden
Jeffrey A. Golden, Chairman,
President and Chief Executive
Officer
Date: October 23, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ Jeffrey A. Golden
Jeffrey A. Golden, Chairman, President
and Chief Executive Officer
(Principal Executive and Financial Officer)
Date: October 23, 1997
/s/ Jerry N. Brown______________________________
Jerry N. Brown, Sr Vice-President
City Bank & Trust Company
(Chief Financial Officer)
Date: October 23, 1997
<PAGE> 13
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,537
<INT-BEARING-DEPOSITS> 88
<FED-FUNDS-SOLD> 2,850
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
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<INVESTMENTS-MARKET> 102,797
<LOANS> 147,318
<ALLOWANCE> (1,875)
<TOTAL-ASSETS> 268,119
<DEPOSITS> 221,894
<SHORT-TERM> 2,245
<LIABILITIES-OTHER> 3,092
<LONG-TERM> 7,033
<COMMON> 830
0
0
<OTHER-SE> 33,025
<TOTAL-LIABILITIES-AND-EQUITY> 268,119
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